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April 8, 2025
Question

Can I deduct Cafe 125 on my NJ State return?

  • April 8, 2025
  • 1 reply
  • 0 views

I'm a New Jersey resident. I'm trying to figure out what medical costs can be deducted on my NJ State return.

So say on my W2 at Box 16 (State wages, tips, etc.) it says $70,000.00, and at Box 1 (Wages, tips, other comp) it says $63,000.00.

In the Gross Pay adjustment/calculation, I have

Less Other Cafe 125 - $3,500.00 (health, dental, vision, etc. insurance premiums that come out of my paycheck)

Less Cafe 125 HSA (Box 12 with Code 'W') - $3,500.00 (HSA contributions by me that come out of my paycheck)

For a total of $7,000 for the Cafe 125 (which would be the difference between the reported NJ State Wages in Box 16 less the reported Federal Wages in Box 1).

For my NJ State return, am I allowed to deduct or get credit for the $7,000.00 of Cafe 125 items (health insurance premiums + HSA employee contributions) plus whatever out-of-pocket medical bills incurred (doctor's visits, medications, etc)? I've made no distributions from the HSA account. 

 

    1 reply

    Employee
    April 8, 2025

    New Jersey Gross Income Tax law does not adopt the federal income tax treatment of

    cafeteria plans as provided under I.R.C. Section 125. However, the New Jersey Gross Income Tax

    law has a very limited exclusion for one particular type of cafeteria plan, not including any

    salary-reduction plan. Since the New Jersey exclusion is limited, the value of cafeteria plan

    benefits typically is includable in New Jersey taxable wages and subject to Gross Income

    Tax withholding.

    April 9, 2025

    Sorry, could you break that down in simpler terms for me? I'm trying to wrap my mind around whether or not my Cafe 125 items -can- be included for a deduction/credit based on what's presented on my W2. 

    Employee
    April 9, 2025

    Simply put, that is not a deduction in New Jersey.